Cyclical Pricing of Durable Goods

54 Pages Posted: 24 Jan 2007

See all articles by Mark Bils

Mark Bils

University of Rochester - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: July 1989

Abstract

I examine price markups in monopolisticly-competitive markets that experience fluctuations in demand because the economy experiences cyclical fluctuations in productivity. Markups depend positively on the average income of purchasers in the market. For a nondurable good average income of purchasers is procyclical; so the markup is procyclical. For a durable good. however. the average income of purchasers is likely to decrease in booms because low income consumers of the good concentrate their purchases in boom periods; so the markup is likely countercyclical. This is particularly true for growing markets. I find markups make the aggregate economy fluctuate more in response to productivity if goods are sufficiently durable.

Suggested Citation

Bils, Mark, Cyclical Pricing of Durable Goods (July 1989). NBER Working Paper No. w3050. Available at SSRN: https://ssrn.com/abstract=463480

Mark Bils (Contact Author)

University of Rochester - Department of Economics ( email )

Harkness Hall
Rochester, NY 14627-0158
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
31
Abstract Views
422
PlumX Metrics